Thursday, January 12, 2017

Monthly Review: December 2016

The last month of 2016 was quite busy for DivGro. I closed three positions and used some of the cash to buy additional shares in existing positions. In some cases, these buys allowed me to execute additional covered call trades and to collect premium income. Regular readers would know that I started trading options in 2016 to boost DivGro's dividend income.

In December, I added another $2,034 in options premiums. Each option sold represents a potential obligation until it expires or gets exercised. I label options income as secured income only when I no longer have the obligation. Please read my December 2016 options update for details.

December was a record setting month for dividend income. I collected $1,407 in dividends, an increase of 83% over December 2015's dividend income of $770. I just love quarter-ending months!

DivGro's projected annual dividend income (PADI) increased to $12,376, well above my goal of $12,000. The significance of $12k is that I can expect dividend income of at least $1,000 per month, on average, in perpetuity. (That's just a cool word meaning indefinitely or forever... and, of course, I'm assuming my portfolio stays the same and no companies cut their dividends).

In December, I published my first Editor's Pick article at Seeking Alpha! The increased promotion certainly helped, as I easily smashed my previous record for page views (now closing in on 25,000). If you haven't read the article, please read Top Holdings of Dividend ETFs and help me reach the 25,000 page view mark.

In last month's review, which I wrote in my parent's home in South Africa, I mentioned that my father underwent quintuple bypass surgery. I'm very happy to report that the surgery went well and that my father has recovered from some complications following surgery. He's steadily gaining back his strength and we're all grateful to see him up and about again!

December Highlights

The main goal of DivGro is to generate a growing dividend income stream. That's why I like to review my dividend income and any changes that would affect future payments.

In December, I collected dividend income from 31 stocks totaling $1,407 in dividend income, for a total of $15,391 in dividend income in 2016. That total includes some dividends I recorded following the consolidation of several of my accounts into a single DivGro portfolio.

Projected annual dividend income (PADI) is the total dividend income I expect to receive in the next twelve months. I recorded ten buys and six sells. Also, two stocks announced dividend increases and one stock announced a dividend decrease. These activities added $871 to DivGro's PADI, which now stands at $12,376.

The following chart plots DivGro's projected monthly dividend income (red line) against monthly dividends:


Comparing dividend income by month is another way to see progress:


Transactions

In December, I added shares to ten existing positions:

• AbbVie Inc (ABBV)
• Cisco Systems, Inc (CSCO)
• Ford Motor Company (F)
• Main Street Capital Corporation (MAIN)
• Nike Inc (NKE)
• Target Corporation (TGT)
• The Coca-Cola Company (KO)
• The Procter & Gamble Company (PG)
• The Walt Disney Company (DIS)
• Valero Energy Corporation (VLO)

This month, I sold shares and reduced my positions in the following stocks:

• PennantPark Investment (PNNT)
• Qualcomm Inc (QCOM)

Lastly, I closed the following positions:

• The Gap, Inc (GPS)
• Union Pacific Corporation (UNP)
• Wells Fargo & Co (WFC)

As a result of these transactions, DivGro's PADI increased by $847.

Dividend Changes

The following stocks announced dividend increases:

• Realty Income Corporation (O)
• Pfizer Inc (PFE)

The following stock paid a reduced dividend:

• Nuveen AMT-Free Quality Municipal Income Fund (NEA)

DivGro's PADI increased by $22 due to these dividend changes.

Dividends Received

I received dividends from 31 different stocks this month, for a total of $1,407 in dividend income:

• AFLAC Inc. (AFL) – $21.50
• Cummins Inc (CMI) – $45.10
• Dominion Resources, Inc (D) – $70.00
• Eversource Energy (ES) – $26.70
• Eaton Vance Tax-Managed Global Diversified Equity Income Fund (EXG) – $58.86
• Ford Motor Company (F) – $90.00
• Gilead Sciences, Inc (GILD) – $47.00
• Helmerich & Payne Inc. (HP) – $49.00
• International Business Machines Corporation (IBM) – $42.00
• Intel Corporation (INTC) – $57.20
• Johnson & Johnson (JNJ) – $43.20
• The Coca-Cola Company (KO) – $35.00
• Lockheed Martin (LMT) – $25.48
• Main Street Capital Corp. (MAIN) – $105.80
• McDonald's Corp. (MCD) – $25.38
• 3M Company (MMM) – $17.76
• Microsoft Corp. (MSFT) – $31.20
• Nuveen AMT-Free Quality Municipal Income Fund (NEA) – $46.67
• Northrop Grumman Corporation (NOC) – $14.40
• Realty Income Corp. (O) – $10.10
• Pfizer Inc (PFE) – $90.00
• Qualcomm Inc (QCOM) – $159.00
• STAG Industrial Inc (STAG) – $27.80
• Target Corporation (TGT) – $24.00
• T. Rowe Price Group, Inc (TROW) – $35.10
• The Travelers Companies, Inc (TRV) – $19.43
• Union Pacific Corporation (UNP) – $60.50
• Valero Energy Corporation (VLO) – $43.20
• Walgreens Boots Alliance, Inc (WBA) – $16.50
• Wells Fargo & Co (WFC) – $20.52
• ExxonMobil Corporation (XOM) – $48.75

Markets

It is worth looking at the markets to understand the environment we're investing in, even though I no longer compare DivGro's performance to those of the markets:

Nov 30, 2016
DOW: 19,123.58S&P 500: 2,198.81NASDAQ: 5,323.6810-YR BOND: 2.37%
Dec 31, 2016
DOW: 19,762.60S&P 500: 2,238.83NASDAQ: 5,383.1210-YR BOND: 2.45%

In December, the DOW gained 3.34%, the S&P 500 gained 1.82%, and the NASDAQ gained 1.12%. The yield on the benchmark 10-year Treasury note rose to 2.45%.

Below are charts showing the market activity of these indices in December, courtesy of Google Finance. (Click on the charts to see detail). Each chart shows a 20-period exponential moving average (in red). I've also included a 20-period relative strength index below the main chart.


Market Value

At the end of December, DivGro's market value was $354,795. This represents an increase of 3.36% over last month's total, and an increase of 98% since the end of December 2015.

Market ValueCash DepositsSimple Return
Dec 31, 1911
$178,873.00$182,935.00-2.22%
Nov 30, 2016
$343,269.00$285,474.3020.25%
Dec 31, 2016
$354,795.48$286,854.0423.68%

Here's a chart showing DivGro's market value breakdown. Dividends are plotted at the base of the chart so we can see them grow over time.


Given the current market value of $354,795, my portfolio has delivered a simple return of 23.68% since inception. In comparison, DivGro's IRR (internal rate of return) is 11.93%. (IRR takes into account the timing and size of deposits since inception, so it is a better measure of portfolio performance).

Portfolio



Here is a snapshot of DivGro's state on the last day of December 2016:


I track the yield on cost (YoC) for individual stocks, as well as an average YoC for my portfolio. DivGro's average YoC decreased from 4.40% last month to 4.26% this month.

Another interesting statistic is percentage payback, which relates dividend income to the amount of capital invested. DivGro's average percentage payback is 9.85%, down from last month's 10.41%.

Finally, DivGro's projected annual yield is at 4.31%, up from last month's value of 4.03%. I calculate projected annual yield by dividing PADI ($12,376) by the total amount invested ($286,854).

Goals Review

I've set some challenging goals for 2016:

  1. PADI: Increase projected annual dividend income to $12,000
  2. Dividends: Earn $10,800 in dividend income
  3. Dividends: Write 120 articles for DivGro
  4. Seeking: Write 52 premium articles for Seeking Alpha
  5. DivNet: Write 8 articles for The DIVNet
Here is a set of gauges representing the progress I've made towards achieving these goals. The last gauge is a reference – it indicates where the other gauges should be after 366 days:


Except for my DivNet goal, I'm happy to say that I've achieved all of my DivGro goals for 2016. Please see my goals for 2017, which includes an aggressive new goal for options income!

Looking Ahead

Trading in January will be lighter than normal as I'm busy transferring my Scottrade account to Interactive Brokers where commission rates are more favorable for options trading. I'm also planning to transfer stocks from one of my FolioInvesting accounts to Interactive Brokers so I can execute options trades on them as well. Currently, FolioInvesting does not offer an options trading platform.

Please see my Performance page for various visuals summarizing DivGro's performance.

Thanks for visiting! Please feel free to comment on this review article below.

14 comments :

  1. That's quite the impressive return. I hope to achieve the same thing on my blog. All the best for 2017.

    ReplyDelete
    Replies
    1. Thanks, Buy, Hold Long -- just keep plugging away... it's a patience game. I've been doing this for 4 years now and it still surprises me to see the progress I've made. Couldn't have imagined it when I started!

      Delete
    2. BTW, I added you to my blogroll.

      Delete
  2. FerdiS, this is excellent to see such an impressive portfolio, I recently discovered the power of DivGrowth Stocks and have been slowly building the portfolio. I'm a big follower of your posts. Thank you.

    ReplyDelete
    Replies
    1. Thanks, Dividends 4 Future -- welcome to the DG investing community! I hope you have a long and prosperous run. As mentioned above, this is a patience game. Keep at it and you'll be happy you did! I've added you to my blog roll.

      Take care!

      Delete
  3. Congrats on a strong ending to the year, FerdiS. Love the direction the charts are headed. Very impressed with your Monthly Market Value Breakdown chart -- that is a cool way of visualizing your portfolio.

    All the best for 2017 and beyond
    R2R

    ReplyDelete
    Replies
    1. Btw, some of your dates are showing as 1912.

      Delete
    2. Thanks, R2R -- I borrowed the idea for the monthly market value breakdown elsewhere... and I agree, it is a great way of visualizing a portfolio.

      Thanks for pointing out the 1912 mistakes -- not sure how those crept in!

      Delete
  4. It was a great month all around for you. Nice job crushing your dividend income in December. Of course i love the options income too. you pretty much crushed your 2016 goals as well. nice work all around.

    ReplyDelete
    Replies
    1. Thanks, Investment Hunting -- 2016 was an interesting year for me with DivGro, trying to position the portfolio for options trading. I'm so glad that many DG investors are also getting into options. Lots of learning still for me to do, but it is a fun addition!

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  5. Hi FerdiS,
    Awesome December results - congrats! I like the monthly market value breakdown chart as well as the progress gauges in particular.
    Best wishes,
    -DL

    ReplyDelete
    Replies
    1. Thanks, DL -- I like those charts too and the progress meter is a nice addition to Google sheets that I've been using for about a year now. Take care and all the best for 2017!

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  6. Great month of December. Excellent way to finish off the year. Your PADI is looking really good! Fun to see that dividend snowball keep rolling!

    Scott

    ReplyDelete
    Replies
    1. Hi, Scott -- I just love quarter-ending months! And you're right about the dividend snowball... compounding working for you. Take care and happy investing!

      Delete

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